NNN lease/commercial in Michigan

[Jessica Yau]

I'm doing my very first 1031 exchange. Selling a multi-family property in Oakland, CA that I've held for 14 months, earned 2x investment. Not seeing attractive CAP rates/cash flow in my area right now so am starting to look at NNN leases and other commercial properties in out of state markets. Michigan is attractive to me because we have a second family home there as well as lots of friends/family in the area, plus CAP rates in the 8%+ range.

Does anyone have experiences to share investing in NNN leases, Michigan markets (looking primarily at Grand Rapids area), or any words to the wise on 1031s?

[Joel Owens]

Hi Joe,

Post here national tenant properties single net where they are selling at an 8 cap with a fresh origination of the primary term lease.

I am not talking about junker mom and pop type NNN stuff. I am talking quality assets.

Maybe they are coming for the smaller mom and pop type stuff. I just took a look on LoopNet. Single tenant even if it was for sale there at an 8 cap the per sq ft rate is in some cases 300 to 400 sq ft.

That tenant goes dark and your second generational tenant will trade much, much lower in rent knocking your cap down substantially. With single NNN and multi NNN the "devil is in the details". People bring me stuff all the time and I get into the lease and the deal doesn't work for a bunch of reasons.

The properties I am talking about are in the millions to tens of millions of dollars. I do not deal in the smaller properties. Those properties yes they trade at higher caps but that is everywhere.

Long term the warm belt states is where most of my investors are buying. Migration patterns show population levels declining in the cold belt states as retirees flock to warmer areas. That fuels job, population growth, higher median incomes, etc.

Every state has some areas that are good but overall declining areas or states are not good long term holds.

Everyone has their opinion and that's just mine.